House Speaker Nancy Pelosi has defended a Democrat proposal to increase tax relief for Americans in a new social spending bill, after figures revealed how constituents in her district could benefit from the measure.
The state and local tax (SALT) deduction allows households to remove from their federal taxes what they pay in state and local income.
In 2017, a tax bill passed by Republicans capped the previously unlimited SALT deduction at $10,000 per household, meaning richer Americans faced a tax hike
This has been a sore point for those living in high-tax states such as New York, New Jersey and California. But as part of a social spending package, House Democrats have proposed to raise the cap to $80,000 to 2030, before bringing it back to $10,000 in 2031 and then expiring.
Pelosi told her weekly news conference that "as a supporter of that particular measure in the bill, that's not about tax cuts for wealthy people. It's about services for the American people."
However, economists and some lawmakers have pointed to how it would help wealthier Americans, who Democrats are targeting to foot more of the bill for their social spending plan.
Analysis by CQ Roll Call, citing the most recent IRS data from 2018, showed that Democrats represent all but one of the 25 highest-taxed districts and thus would benefit the most.
Among them is Pelosi's 12th congressional district where the average SALT paid by households claiming a deduction is $62,769—well under the $80,000 cap, meaning the measure could deliver significant deductions to her constituents.
Households in only three districts pay more than $80,000 in SALT. Their representatives are all Democrats, according to CQ Roll Call figures.
They are Rep. Anna Eshoo from California's 18th district ($83,313), Rep. Jerrold Nadler from New York's 10th district ($109,395) and Rep. Carolyn Maloney's New York's 12th ($109,935).
Lifting the cap to $80,000 "provides tax breaks that mostly go to the richest 5 percent and almost entirely go to the richest 20 percent," said Steve Wamhoff, director of federal tax policy for the Institute on Taxation and Economic Policy.
Bipartisan non-profit public policy organization Committee for a Responsible Federal Budget said a family of four in Washington making $1 million per year would get 10 times as much tax relief from expanding the SALT deduction as a middle-class family would get from an expansion of the child tax credit, another policy which Democrats also want.
Proposals on SALT may change as negotiations continue. One plan is for a five-year repeal from 2021 through 2025 with a reinstatement from 2026 through 2031. Another plan includes a three-year repeal with a higher cap after 2025.
However, the issue is complicating passage of the bill, which Democrats are trying to get through both the House and Senate without Republican support.
Meanwhile, Rep. Jared Golden, (D-ME) the only House Democrat opposing the Build Back Better legislation, tweeted: "The more we learn about the SALT provisions, the more it looks like another giant tax break for millionaires."
Newsweek has contacted Pelosi's office for comment.
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
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